National Empowerment Fund (NEF) “Growing B lack E conomic P articipation ”

1. National Empowerment Fund (NEF)“Growing Black Economic P articipation” 2012 Africa SMME Conference and Awards • Presented by • Mr Chris Louw • Regional Manager: Western Cape • 27 September 2012

2. NEF Mandate … • Established by the • National Empowerment Fund • Act No 105 of 1998, the NEF is a driver and a thought-leader in promoting and facilitating Black economic participation through the provision of financial and non-financial support to Black empowered businesses, as well as by promoting a culture of savings and investment among Black people 1

3. NEF MandateGrow black economic participation Unpacking the NEF Mandate … Financial & non-financial support Culture of savings & investment • Fund Management • Fund black-empowered businesses • Business plan toolkit • Mentorship support • Early-stage investments • Asset Management • Investor Education • Public Share Offers • Enterprise Development • BEE Repository 2

4. SME Market Failures The NEF seeks to address the following market failures: • Lack of access to finance • Lack of access to markets • Lack of specific industry-knowledge and/or management experience • Limited or no equity contribution • SMEs have low bargaining power with suppliers and customers (they are price-takers) • SMEs compete with well-established businesses • They are often undercapitalized and have low asset base • SMEs are characterised by lack of accurate and reliable information, and lack of business-planning skills • Lack of management depth – small and multifunctional, and often lack a range of business-management skills

5. NEF Funding • R250 000 – R75 million • Start-up • Expansion • Equity Acquisition 4

6. Offerings in line with Re-engineered Processes

7. NEF Funding Products in detail On average, the NEF’s business loans are repayable over 4 to 7 years, and up to 10 years where marked with an asterisk (*) below: 6

8. NEF Funding Criteria • Each application is assessed in terms of the following criteria: • commercial viability of the business, • minimum percentage of black ownership or interest, • black women empowerment, • black managerial and operational involvement, • job creation, • specific product criteria, • geographic location of the business (rural/urban/disadvantaged areas), • community involvement, • compliance with all the relevant laws and regulations, • return on investment, and • the possibility of co-funding with another public or private sector institution. 7

9. Successes To Date Over R3.7 billion approved for black businesses More than R2,7 billion disbursed Over R680 approved for 233 SMEs • R108m approved for 7 rural community deals Over 29 000 jobs supported and created 21.5% of the NEF’s portfolio comprises women-owned businesses 8

10. NEF Approvals & Disbursements by Value

11. NEF Portfolio by Sector by Value …

12. Business Planning? www.nefbusinessplanner.co.za • Simple to use • Free to the public • Step by step question & answer process • Helps with financial projections • Formats into a Word document • Confidential (password-protected) • Download and print • Submit to any funder 11

13. Mentorship Ongoing mentorship support across the country • Globally, 30% of start-ups fail in the first 2 years, • Less than 50% survive beyond 4 years • Mentors across the country to help businesses • Expert advice on strategy and operations • Improve the chances of the business succeeding • Provided for free to NEF investees 12

14. Enterprises Owned and Managed by Women Funded portfolio to date = 25% Target = 40% Women, be a part of this growth

15. espAFRIKA:- Events management company. Owners of the world renowned Cape Town Jazz Festival. NEF provided R10m revolving credit facility.

16. Project Description – Mgro MCPL Deal • The transaction relates to the acquisition of 4 (four) farms that will cater for Citrus products from South Africa worldwide. • This investment will create an opportunity for the Emgro Properties (BEE Group) to own productive farms with established markets in place. • The facilities will be through the guidance of Mouton Citrus (Pty) Ltd and assistance of daily running, operations, marketing, technical know-how, distribution etc.   Shareholders Funding Structure • Pre - NEF Investment • MCPL (45%), Seald Sweet (45%) and Mgro (10.0%) • Post - NEF Investment • MCPL 20%, Mgro 40%, Workers 25%, NEF (15%) Community warehoused • Shareholder loans of R40 million, Interest charged at prime less 3% repayable over a 10 years period • R10 million preference shares redeemable over a 10 years period with a 6% coupon rate. • The NEF is targeting a minimum IRR of 15% Investment Rationale • 80% owned by BEE grouping (Mgro Group) including permanent farm workers, seasonal workers and community of Citrusdal. • Located in poverty stricken area of Citrusdal, Western Cape. • Supporting a black company to own productive citrus farms with established global markets. • Retention of 40 jobs and creation of 110 new jobs at primary farming level & 540 seasonal jobs during harvesting

17. Masiza Mussel Farm (R9.9 million, Western Cape)

18. Masiza Mussel Farm… Project Description • The commercialisation and an expansion of The Masiza Mussel Farm Pilot Project • Masiza produces 739 tons p.a. of black mussels in Saldanha Bay, Western Cape • Has a 100% off-take agreement with LaVie Seafood (the only processor of mussels in RSA) Shareholders Funding Structure • Pre - NEF Investment • Masiza Trust (6 farmers) & Blue Bay Aqua Farm • Pre - NEF Investment • Masiza Trust, Blue Bay Aqua Farm, LaVie and Blue Bay Workers Trust, Technical Partner (Mentor) and NEF • NEF 7 year Senior Loan of R4.95 million @ 8% interest with a 1 year interest and capital moratorium • NEF 7 year Shareholders Loan of R4.95 million @ 8% interest with a 1 year interest and capital moratorium • The NEF is targeting a minimum IRR of 8% Investment Rationale • 62% owned by BEE and Located in poverty stricken area • Supports economically sustainable and globally competitive marine aquaculture sector • Retention of 6 jobs and creation of 10 new jobs at primary farming level & 90 new jobs at processing plant

19. iMbewu Fund deal summaries Sale’s Hire

20. Examples of NEF funding Mohale Agricultural Cooperative approached the NEF for funding assistance to the tune of R 13,7 million for the purchase of poultry and vegetable farm. Their product line includes chickens, cabbages and maize. The farm is located in Soekmekaar, Limpopo Province. Supporting operationally involved entrepreneurship, the growth prospects of the land will yield 15 additional jobs and saving 30 current permanent jobs. R13,7 million Limpopo Province R9, 9 million in Middledrift The community of Middledrift formed the Gwebindlala Trust, through which they provided land for dairy farming. Through funding provided by the NEF to the value of R9, 920, 000, Middledrift Dairy established a commercial dairy farm. The funds have been utilised for start-up costs, acquisition of assets, machinery and working capital. Middledrift Dairy has an off-take agreement with Clover. 19

21. Franchises Funded to Date Pre-approved Franchise Agreements 20

22. Enterprise Development Fund Broad – Based Black Economic Empowerment Codes of Good Practice – Section 9(1) Series 600 provides that companies make monetary or non monetary contributions either recoverable or non recoverable for development, sustainability and financial and operational independence of beneficiaries. 21

23. Why Enterprise Development? • Limited management time to spend on non-core business • Insufficient knowledge of BEE ED requirements • Insufficient resources and skills to support BEE start-ups, which require significant skills injection to achieve economic viability • Poor economies of scale achieved based on number of initiatives • Lack of time and resources to identify sustainable Beneficiaries; • Lack of a business model to maximise recognition of contribution; • Lack of a process to monitor progress on projects and to introduce corrective measures, where necessary; • Delaying implementation until the right partner comes along; and • Reservation of spending lump sum due to fear that money will be wasted or misused. 22

24. Approach

25. Come to the NEF today • Are you a black entrepreneur? •Do you have a viable business idea and a business plan? • Does it have financial projections? •Do you need funding of between R250 000 and R75 million? • Have you registered a company?•Do you have a valid RSA ID?• Will you be directly, operationally involved?

26. Thank you Contact Details Northern Cape and North West offices to be opened during 2012 www.nefcorp.co.za 25